Daily Archives: 10/03/2015

Many home buyers and current new home owners are unaware that first time home buyers may qualify for a housing subsidy under the FLISP grant.

“If they do not investigate and make use of the opportunity they may be losing thousands of rands by not claiming the FLISP subsidy, but also losing out on the prospect of reducing their bond repayment and bond term and as such losing out thousands more” says Verna Pugin who conducted an investigation into FLISP subsidies.

The word FLISP is an abbreviation for “Finance Linked Individual Subsidy Plan”, initiated by the Government to assist first time home owners in acquiring their own homes. It is available to all first time residential home buyers who earn between R3 501 – R15 000 per month and whose home loan has been approved, (as a pre-requisite) as well as current first time new home owners (who have already taken transfer). Current new home owners must apply for the assistance within 12 months of taking ownership.

The minimum FLISP subsidy is R20 000.00 and if such subsidy is paid into a bond of R500 000.00 as a “once-off” payment, the home owners can save up to almost R100 000.00 and reduce his/her bond repayment from 20 years to almost 18 years, saving 2 years of bond repayments. Similarly, a subsidy of R40 000.00 awarded to a qualifying home owner with an income of R11 700.00 who may qualify for a home loan of R400 000.00, may save more than R170 000.00 on bond repayments, and reduce the bond repayment term from 20 years to 15 and a half years.

The maximum purchase price of R300 000 was removed since 1 April 2014, yet few existing home owners are aware of this opportunity to claim their FLISP subsidy.

The benefit to a bank will be that an additional payment into a bond account will also reduce the debt risk for a bank, as it reduces the loan to value ratio. ”We suggest that clients approach their banks to reconsider and reduce the interest rate that is applicable to a home loan once the FLISP subsidy is paid into their home loan account”, says Vern Pugin, who made an intensive study of government assistance over the past few years and she realised that home owners need to be assisted and informed about their rights to obtain FLISP subsidies. The research done by Verna led to hosting workshops with property developers, estate agents, home buyers and home owners as she realised the dire need therefor amongst all stakeholders in the property market.

FLISP subsidies are available to pre-qualified property developments and to obtain such approval, property developers need to submit their application in advance to the Department of Human Settlements.

The pre-approval of a home loan remains a barrier for many first time buyers, property developers, sellers and estate agents as they do not want the property transaction to be held up, due to the long waiting period to obtain a FLISP approval. Up to recently home buyers did not have access to the services like the software developed by My Bond Fitness to pre-check a buyer’s credit profile status and affordability in advance.

With the services provided by My Bond Fitness www.budgetfitness.co.za a buyer can obtain his affordability within a few minutes and as such he determine if he will be able to qualify for FLISP and then in advance prepare himself for the FLISP application.

The FLISP subsidy is however not limited to property developments only as this grant is available to the open market for all first time buyers as well. Any type of residential property can be bought, inter alia plot and plan except vacant, land, a new house, or a property with an existing houses on it, as long as the applicant has pre-qualified for a home loan when he or she submits their application for the FLISP subsidy. Applicants will have to meet the qualifying criteria which can be found on our website and will be advised by us as to which documentation is to be annexed in support of their application.

Verna realised that home ownership education will play a vital role in creating sustainable home ownership and teamed up with Meyer de Waal, who developed the My Bond Fitness as well as the Rent2Buy concept.

Home ownership education forms a vital part of the home ownership journey and Rent2buy process.

With Rent2buy, aspiring home owners will first rent the home they want to buy, should they not meet the strict requirements of a bank to qualify for their home they want to buy, and during the rental period, they secure the property with the Rent2Buy agreement, then have the time and opportunity to improve their credit rating and affordability and save towards a deposit to enhance their chances the next time they apply for a home loan, some 12- 18 months later. Verna says such opportunities will allow the processing a FLISP subsidy application much faster as by the end of the rent2buy period, all the required FLISP documentation will be ready and available for processing.

There are a few issues that you want addressed and statements that you have made that need to be corrected.

You are correct when stating that paying off one’s debt, would depend on the amount one makes available to creditors monthly.

The assumption on the next statement, namely that one should pay off the debt between five to seven years with no bond or car, is incorrect.

This is because this factor would be determined by the amount of debt, the interest rates, the monthly repayment amount, whether your debt counsellor has taken the in duplum rule into account or whether there is there an annual escalation.

Depending on any of these above factors, the outcome would vary by years.

An example of the above could be the following:

Client A

A client can only afford R1 000 per month as repayment towards his creditors.

The debt counsellor does a restructure without trying to lower the interest rates and without adding in an annual escalation of 5%.

The restructure works out that client A would become debt free in a seven year period.

Client B

The client can only afford the R1 000 per month as repayment towards his creditors.

The debt counsellor does a restructure with lowering of interest rates and adds in a 5% annual escalation.

The restructure works out that client B would become debt free in a three year period.

Consumers need to realise that the more they can pay off while under debt review, the sooner they will become debt free.

Small amounts make large dents in the debt, especially if a court order has been granted and there is a fixed calculation that must be adhered too.

I would suggest the following in your case:

Get a copy of the court order as well as the repayment plan.

Make sure that the repayments are being adhered to by getting monthly payment reports from the debt counsellor.

Get detailed statements from all credit providers from the inception of each account to date.

Check to see if there are any other charges other than the capital amount and interest being charged.

Anything other than interest and capital would not be in line with the court order and your creditors would need to adjust their systems accordingly.

Don’t allow the creditors to intimidate you. You have a court order, which everyone must adhere to, even the banks. There are no exceptions.

In duplum rule

From the statement of a creditor, determine what date default occurred and then double that debt.

From the date of default, the debt, which includes all service charges, interest rates, credit life insurance, collections and legal fees, may never become more than double.

This is in terms of Section 103(5) of the National Credit Act. It is called the in duplum rule and is one rule every credit provider tries to hide from every consumer.

Consumers must become more aware of their rights, especially in this regard and start challenging their creditors.

The debt under debt review can only go up to a certain point and then must come down.

I suggest you speak to your debt counsellor and follow the above suggestions and I am sure you would be pleasantly surprised.

It does take many hours and this is why many debt counsellors don’t enforce this rule.

But every consumer under debt review needs to work together with his or her debt counsellor, especially when brining to light issues such as the in duplum rule.

– Fin24

My Budget Fitness developed with a team of experts a Debt Negotiation structure – to avoid going into Debt Counselling as we saw that many clients stay trapped in debt.

The only way to get out of debt is to analyse your portfolio, the work out a plan forward and get a top negotiator to renegotiate your debt and then stikc ot the new affordable plan of repayment.

Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

Buying a home is a major step towards creating a haven for your family, and making a long-term investment in your financial future. As such, it is a purchase that should be carefully considered and planned for.

This is according to Steven Barker, Head of Home Loans at Standard Bank, who says the good news is that despite tough economic conditions, funding is available to people wishing to buy homes.

He says as buying a home is so important, it is worth doing some homework before approaching a bank for a loan. Consideration should not only be given to finances, but to the property itself, he says.

This means, buyers should find out more about the area in which the house is situated, the average value of properties in the suburb, and take time to have the house examined for possible defects such as poor plumbing, potential electrical problems and structural concerns such as rising damp.

In addition, always look at the type of ownership you are considering, for example, a freehold (stand-alone) house versus a sectional title (flat or complex) property, as it’s important when buying a sectional title property that you review and understand the financial standing of the complex before you buy into it.

Once you are satisfied with the location and condition of the property, the financial planning process begins.

Baker shares some helpful tips:

1. Checking your credit history

When a bank assesses a person for a home loan, their credit history plays a major part in whether they are suitable. It pays to check your credit rating, to ensure that any outstanding debts are settled and make sure that any accounts you may have are correctly serviced.

2. Affordability

– Make sure you have sufficient money to pay a deposit on the house. Although a bank assesses people’s financial situations individually, it is now rare to get 100% bonds.

– Plan for the one-off costs such as electricity deposits, and consider what additions like security are likely to cost.

– Check what insuring the property will cost you on a monthly basis.

– Consider credit life cover to protect the loan outstanding balance in the event of disability, dread disease, retrenchment or death.

3. Future financial commitments

Plan for the future by making sure that your personal cash flow can cope with increased payments if interest rates should rise. By preparing a personal budget that allows for costs to increase, you will avoid future financial difficulties.

Baker says taking a proactive approach to monthly bond payments when buying a house also sows the seeds from which you will reap rewards. He says if you buy a house and can pay extra money on your bond, the benefits can be significant; any additional money paid in is credited against the account and saves on interest costs.

These savings can be significant and knock years off your repayment period, he explains.

Additional money paid in also acts as a buffer against future rates increases, he says. These will have less impact, as you will already have been paying a higher amount.

“A home loan is an investment in your life and the lives of those closest to you. Taking care of your financial status when your house is acquired will bear fruit for many years to come.”

With the latest software of My Bond Fitness – www.mybondfitness.co.za you can do your own credit check and affordability check all in one – in a time of less than 5 minutes. It will give you an accurate estimate of your own credit profile and affordability. Once you are in possession of such information – you will be able to negotiate a much better deal with a bank to negotiate the best possible interest rates and loan term.